Report Name: Sugar Annual
Total Page:16
File Type:pdf, Size:1020Kb
Required Report: Required - Public Distribution Date: April 15, 2021 Report Number: SF2021-0021 Report Name: Sugar Annual Country: South Africa - Republic of Post: Pretoria Report Category: Sugar Prepared By: Wellington Sikuka Approved By: Kyle Bonsu Report Highlights: Post forecasts that the South African sugar cane crop will increase by 3 percent to 18.8 million Metric Tons (MT) in the 2021/22 MY, based on normal weather conditions, improvements in yields, and marginal increases in area planted. Post forecasts that raw sugar production will increase by 3 percent to 2.2 million MT in the 2021/22 MY, based on the increase in quantity of cane delivered to the mills, a longer milling season, and consistent mill efficiencies (sugar recovery rate). South Africa is expected to fully utilize the United States Tariff Rate Quota (TRQ) allocation in the 2021/22 MY. The industry has been able to successfully increase domestic demand by 150,000 MT in the 2020/21 MY, partly due to the recently introduced Sugar Master Plan and the surge in demand for home consumption during the COVID-19 lockdowns. THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Commodities: Sugar, Centrifugal Sugar Cane for Centrifugal Sources Illovo Sugar Company - http://www.illovo.co.za RCL Sugar Company - https://rclfoods.com/ South African Canegrowers Association - http://www.sacanegrowers.co.za South African Farmers Development Association - http://sa-fda.org.za/ South African Revenue Services - www.sars.gov.za South African Sugar Association - http://www.sasa.org.za South African Sugar Association - http://www.sasa.org.za Tongaat Hulett Sugar - http://www.huletts.co.za MT – Metric Tons MY – Marketing Year (April – March) 1US$ = 14.47 Rands as at April 14, 2021 Background Sugar cane in South Africa is grown in the Kwa-Zulu Natal Province and Mpumalanga Province as shown in Figure 1. Sugar cane production in the Kwa-Zulu Natal Province is 95 percent rain fed with limited irrigated areas, while production in the Mpumalanga province is fully irrigated using center pivots, sprinklers and the canal system. At least 80 percent of the sugar cane production is supplied by large scale farmers, and the remaining 20 percent of production is accounted for by small scale farmers. The sugar industry classifies growers based on sugar cane production. The term “large scale growers” refers to all growers producing above 1,800 Metric Tons (MT) of sugar cane per season, and all growers producing less than 1,800 MT of sugar cane are classified as “small scale growers”. Typically, small scale growers have less than 30 hectares, and the majority of small scale farmers in the communal areas have less than 1 hectare. In total there are approximately 22,950 registered sugar cane growers in South Africa, comprising of 1,369 large scale growers and 21,581 small scale growers. Both large scale and small scale farmers are required to sign a sugarcane supply agreement with a specific sugar mill to guarantee that they will supply the respective mill and that their sugar cane deliveries will be accepted if they meet the agreed quality standards. Page 2 Figure 1: Map of Sugarcane Production Areas in South Africa Source: South African Sugar Association (SASA) Figure 2 shows the structure of the South African sugar industry. The South African Sugar Association (SASA) is funded by both growers and milling companies, and is the highest decision making authority in the industry on common issues for sugar cane growers and sugar millers. SASA provides support services to the entire industry’s value chain including the export of all the raw sugar, cane testing, and policy advocacy. SASA was established by the Sugar Act of 1978 and is under the authority of the Department of Trade, Industry and Competition (DTIC). The South African Sugar Research Institute (SASRI) is a division of SASA and conducts scientific research on sugar cane varieties, pests, diseases, and crop protection. SASRI also provides extension and meteorology services for the industry. There are two associations representing sugar cane growers, the South African Canegrowers Association (SACGA) and the South African Famers Development Association (SAFDA). SACGA was the first association established in 1927 and currently represents predominantly white large scale growers with some small scale growers. SAFDA was formed in 2017, initially to represent the interest of black sugar cane farmers due to the slow pace of transformation in the industry. However, some white commercial farmers are members of SAFDA due to the services that it offers including bulk procurement of inputs, land reform support and development finance. The South African Sugar Millers Association (SASMA) represents the interests of the six sugar milling companies; Tongaat Hulett Sugar Ltd, Illovo Sugar Ltd, Tsb Sugar RSA Ltd, Gledhow Sugar Company, Umfolozi Sugar Mill Ltd and UCL Company Ltd. These six milling companies own a combined total of 13 sugar mills, 11 in the Kwa-Zulu Natal Province and 2 in the Mpumalanga Province. Two of the sugar mills (Darnall and Umzimkulu Mill) were not opened in the 2020/21 MY, due to financial Page 3 challenges and the milling company’s strategy to maintain their commercial viability. The financial challenges faced by the sugar industry has also resulted in Umzimkulu Mill being permanently closed in the 2021/22 MY. There are concerns that if the status quo remains, more sugar mills may be permanently closed which will be devastating to the rural communities and towns who rely on these mills for employment, business and development opportunities. The Tongaat Hulett Sugar Ltd, Illovo Sugar Ltd, RCL Foods (Formerly known as Tsb Sugar RSA Ltd), and Umfolozi Sugar Mill Ltd produce both raw and refined sugar. The Umfolozi Sugar Mill Ltd and UCL Company Ltd only produce raw sugar. The Gledhow Sugar Company only produces refined sugar. Tongaat Hulett Sugar Ltd, Illovo Sugar Ltd, and RCL Foods also own sugar mills outside South Africa in Eswatini (formerly known as Swaziland), Malawi, Zimbabwe, Zambia, Mozambique, and Tanzania. The Sugar Milling Research Institute (SMRI) is involved in research on sugar manufacturing, and provides technical services to the Southern African sugar milling and refining industries. Figure 2: Structure of the South African Sugar Industry SOUTH AFRICAN SUGAR ASSOCIATION (SASA) S.A Sugar Research Institution (SASRI) Sugar Milling Research S.A MILLERS ASSOCIATION Institute CANE FARMERS FEDERATION (SASMA) (SMRI S.A Cane Growers S.A Farmers Development Tongaat Hulett Sugar Ltd Illovo Sugar Ltd Association Association (SACGA) (SAFDA) RCL Sugar RSA Ltd Umfolozi Sugar Mill Ltd UCL Sugar Company Ltd Gledhow Sugar Company Source: SASA, SACGA, & SAFDA. Page 4 Sugarcane: Production Post forecasts that the sugar cane crop will increase by 3 percent to 18.8 million MT in the 2021/22 MY, up from 18.2 million MT in the 2020/21 MY. This is based on normal weather conditions, improvements in yields, marginal increases in area planted, and industry efforts including under the Sugar Master Plan to increase production, especially for small scale farmers. This is expected to be partially offset by some growers diversifying to more profitable crops, lower replanting from growers who are under financial distress, and risks of carry-over cane due to the limited milling capacity following the permanent closure of Umzimkulu mill and temporary closure of the Darnall mill. The 2021/21 MY sugar cane production was revised downwards to 18.2 million MT, due to cane that was carried over and could not be milled due to limited milling capacity. The full impact of rising costs of fuel, transport, fertilizer, chemicals and labor (due to the increase in minimum wages) are only expected to have an impact on sugar cane production in the medium term and not in the 2021/22 MY. The industry expects the impact of COVID-19 on the 2021/22 MY sugar cane production to be minimal based on normal operations in most farms and minimal disruptions to inputs or labor supply during harvesting. There is no commercial sugar beet production in South Africa. The impact of the drought on sugar cane production from the 2014/15 MY and 2016/17 MY is evident in Figure 3. Sugar cane yields are expected to increase to 74.9 MT/hectare (HA) in the 2021/22 MY, from 72.9 MT/HA in the 2020/21 MY, due to normal weather conditions and improved performance of new cane varieties. Table 1 shows the cane yields since the 2012/13 MY. Notably, the variation in cane yields ranges widely from 30 MT/HA for dryland smallholder farmers in the Kwa-Zulu Natal Province to about 95 MT/HA for farmers in the irrigated growing regions of the Mpumalanga Province. Higher costs of production, due to increases in fertilizer, electricity and fuel costs, and declining sugar cane prices have resulted in some farmers diversifying to macadamia nuts, avocados, citrus, vegetables and poultry production. To reduce the cost of electricity, the SACGA has started the production of electricity using biogas under their subsidiary company Womoba Pty Ltd in partnership with one grower. It is expected that, should the project prove to be viable, some sugar cane farmers in irrigated areas would also invest in biogas projects to improve farm profitability and reduce electricity costs. Some sugar cane growers are in the process of investing in the production of stevia to diversify their income streams. Page 5 Figure 3: South African Sugar Cane Production 25,000,000 20,000,000 15,000,000 Production (MT) Production 10,000,000 Sugarcane 5,000,000 0 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2019/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21* 2021/22** Sugarcane Production Average Sugarcane Production * Estimate.